Looking for a Way Out: Temporary Cuts a Sensible Solution

Posted on March 23, 2003 | Type: Op-Ed | Author: Thomas C. Patterson
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All the ideas on the table for resolving the 2004 budget crisis share a fatal flaw-none of them can gain a majority of votes in the Legislature.

Democrats generally believe that permanent budget reductions would be punitive for agencies that have already suffered cuts during the crisis. They fear excessive government job loss and the inability to administer agency services.

Republicans, on the other hand, question the governor's wisdom in proposing a 10 percent spending hike in a time of fiscal stress. Furthermore, they believe that the various debt instruments she proposes to finance operating expenses would unfairly defer the burden to future taxpayers.

Others are proposing tax increases. But there is abundant evidence that tax hikes would prolong our economic distress and thus would ultimately be counterproductive. One-time tax increases have also been proposed, but a recession is the worst possible time to institute a growth-retarding tax. Moreover, legislative history suggests that such a tax, once instituted, would soon be deemed indispensable by those who benefit from it, turning a temporary tax hike into a permanent tax increase.

The least objectionable way out of the dilemma may be to embrace temporary spending cuts consisting of reduced appropriations deducted from agency baselines. When state revenue picks up again, a trigger mechanism could be activated to restore these cuts on a pre-determined priority basis. This could be done in increments until full restoration is achieved. No other discretionary budget increases would be permitted until these specially designated reductions had been restored to baseline.

Agency directors may be unlikely to embrace this plan, especially as long as they could reasonably hope to be winners in the frantic competition to retain their budgets intact. However, a temporary cut in the agencies' spending would encourage them to prioritize, consolidate and economize. In fact, giving agency heads maximum flexibility in determining how to manage these temporary reductions is a vital part of this proposal.

Agency leaders might get serious about looking for efficiencies inside their departments. For example, universities could temporarily require higher teaching loads from faculty without doing permanent harm to their mission. Perhaps DEQ could undertake fewer frequent compliance checks for one year. DOR may need to lengthen further the time needed to produce refund checks for taxpayers. Capital and equipment purchases could be deferred. Such measures would certainly entail inconveniences, but would hardly mark the end of the world.

Many have noted that our civil court system is far too encumbered and is over-utilized for the resolution of routine disputes. A temporary budget reduction could result in innovations that streamline procedures and encourage more private arbitration and alternative dispute resolution. The Department of Tourism could put on hold its least productive advertising contracts. State parks and museums could restrict services or even close temporarily until funding was restored.

Under this budget-balancing plan, Democrats would get to keep state agencies and programs fundamentally intact, while Republicans would avoid tax increases to balance the budget. This short-term solution could then set the stage for reforms designed to ensure that a budget crisis of this magnitude does not happen again. A firm spending cap on state government spending is a long-term solution that will help make that goal a reality.

When Arizona's families face a drop in income, very few of them would increase their household budget by 10 percent and finance it with their credit cards. But neither would they move to a worse neighborhood, permanently change their standard of living, or give up their long-term goals. Instead, they would just cut back on a few expenses until their income is restored. Arizona can do the same.

--Former Senate Majority Leader Tom Patterson is chairman of the Goldwater Institute.

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